Oil Caps Longest Gain Since April on N.Y. Manufacturing

By Moming Zhou -
Jul 16, 2012

Oil capped the longest winning
streak since April as manufacturing in the New York region
expanded in July at a faster pace than anticipated.

Futures climbed 1.5 percent as the Federal Reserve Bank of
New York’s general economic index, the Empire State Index,
increased to 7.4 from 2.3 in June. Crude gained as U.S. equities
reduced losses and the dollar fell against the euro.

“People are thinking that the manufacturing number is
another sign of bottom in the economy,” said Michael Lynch,
president of Strategic Energy & Economic Research in Winchester,
Massachusetts. “Oil is also moving with stocks and the
dollar.”

Oil for August delivery rose $1.33 to settle at $88.43 a
barrel on the New York Mercantile Exchange. The four-day advance
is the longest since a six-day streak ended April 27. Prices
have fallen 11 percent this year.

Brent crude for August settlement increased $1.15, or 1.1
percent, to end the session at $103.55 a barrel on the London-
based ICE Futures Europe exchange. The August futures expired
today. The more-active September contract jumped $1.95, or 1.9
percent, to $103.37.

The gain in the Empire State Index topped the median
forecast of 51 economists surveyed by Bloomberg, which called
for an increase to 4.0 for July. Readings greater than zero for
the index, which covers New York, northern New Jersey and
southern Connecticut, signal expansion.

Economic Data

“The Empire manufacturing data is better than expected,
although that doesn’t really represent very much of the U.S.
economy,” said Addison Armstrong, director of market research
at Tradition Energy in Stamford, Connecticut.

The Standard & Poor’s 500 Index pared its loss to 0.3
percent after falling as much as 0.6 percent in intraday
trading. The dollar declined 0.2 percent against the euro after
climbing as much as 0.6 percent. A weaker dollar and stronger
euro increase oil’s appeal as an investment alternative.

Prices also climbed as a U.S. Navy vessel fired on a
motorboat off the coast of Dubai, after it ignored warnings not
to approach, an official said. One person was killed, according
to a second U.S. official with knowledge of the incident.

Goldman Sachs Group Inc. said its “positive view” on oil
prices has been reinforced as supplies tighten amid sanctions
against Iran and a labor strike in Norway, according to an e-
mailed report dated today.

Oil production in Norway, western Europe’s largest
exporter, fell to 1.502 million barrels a day in June, the
lowest level in almost 21 years, after a strike disrupted
operations, the Norwegian Petroleum Directorate said in a July
13 statement on its website.

Brent Gain

Oil’s gain was led by Brent, which is “tied to actual
tightness associated with things like the loss of production
from the Norwegian oil workers’ strike,” said Tim Evans, an
energy analyst at Citi Futures Perspective in New York.

Iran’s crude output will fall by about 1 million barrels a
day by the end of 2012 because of European Union sanctions that
became effective July 1, the U.S. Energy Department forecast in
its July 10 Short-Term Energy Outlook.

Hedge funds cut bullish oil wagers for the first time in
three weeks, according to the Commodity Futures Trading
Commission’s Commitments of Traders report on July 13.

Money managers, including hedge funds, commodity pools and
commodity-trading advisers, reduced net-long positions by 6,919
futures and options combined to 128,092 in the seven days ended
July 10, the CFTC report showed.

Bullish Bets

Oil traders have trimmed wagers on rising prices by 53
percent from a 2012 peak in the week ended Feb. 28.

Citigroup Inc. cut its 2012 forecast for West Texas
Intermediate crude to $94.10 from $95 after oil averaged $93.35
a barrel in the second quarter, according to a quarterly outlook
by analysts Edward Morse and Heath Jansen. It trimmed its Brent
estimate to $113.10 today from $115 in an outlook issued June 1.
The bank kept its 2013 forecasts for the European and U.S.
benchmark oils at $99 and $85, respectively.

Electronic trading volume on the Nymex was 433,370
contracts as of 3:40 p.m. in New York. Volume totaled 511,859
contracts on July 13, 8.6 percent below the three-month average.
Open interest was 1.44 million.